In recent years, it has become clear that the Securities and Exchange Board of India (SEBI) is taking steps to stop stock market manipulation. This is important because such manipulation affects how fast the market grows.
Let’s get into how market manipulation influences the modern world and the regulatory SEBI measures against stock market manipulation to reduce its occurrence.
SEBI’s Regulatory Framework Against Market Manipulation
SEBI has established a comprehensive framework to find fraudulent and unfair trade practices. The Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations prevent acts such as price manipulation and dissemination of false information. These regulations empower SEBI to conduct investigations and take disciplinary action against such manipulative entities, which empowers a fair trading environment.
Implementation of Advanced Market Surveillance Systems
It is the Integrated Market Surveillance System that SEBI has now established to help it efficiently trace and monitor all exchanges’ trading. The IMSS will include a system that can track real-time market activities and spot unusual transaction patterns. These patterns can show signs of market manipulation and other bad practices. SEBI has now technologically empowered the authority to better detect and act swiftly against conceivable abuses within the market.
Strengthening Surveillance Among Stockbroking Firms
In July 2024, SEBI mandated all stockbroking houses to have an effective internal surveillance system. All firms must be able to exercise complete control over their trades through comprehensive surveillance systems that can detect and thwart fraud or market abuse. This would also require well-documented whistle-blower policies for prompt reporting and addressing critical suspicious activities.
Addressing Derivatives Market Manipulation
SEBI has mooted tougher regulatory provisions in the derivatives segment to reduce manipulation risks. In February 2025, the regulator suggested linking the market-wide position limits for single-stock derivatives with liquidity in the cash markets. This measure aims to prevent a big firm from taking undue advantage of the prevailing market conditions and, hence, promote integrity in the market.
Combating Unauthorised Financial Advice on Social Media
Social media platforms like WhatsApp, Telegram, and Instagram have given rise to the unregulated financial advice problem. Stock tips, rumours, and speculative trading recommendations cross these platforms so quickly that they distort the real value of stocks, causing artificial price fluctuations. SEBI acknowledges that this is increasingly becoming a serious challenge and has attempted to regulate the financial advice industry in social media.
SEBI’s Response to Social Media Manipulation
Being aware of social media’s influence on investor conduct, SEBI has requested wider measures to curb unregulated financial advice disseminated via WhatsApp and Telegram. In February 2025, SEBI initiatives sought the powers to remove any objectionable content and access the communication records. This move intends to protect investors from possible misdirection and fraud.
Enhancing Regulations for Algorithmic Trading
To be eligible for algo trading in the country, a trader must pass some tests related to the algorithm’s working and reliability before the trader can submit the algorithm for use. Algorithmic trading is a possible automated trading strategy of buying or selling stock using algorithms for execution without the need for human intervention during the execution process.
These algorithms are meant to automatically place an order to buy or sell a stock according to program instructions. They do allow humans some flexibility for last-moment decision-making in case emergencies arise. Otherwise, the whole process will be automated, with a system to guide both functions and ensure they occur at a determined moment.
Future Outlook and SEBI’s Role in a Changing Market
As markets keep changing due to the influence of technological advances, SEBI’s regulations must evolve with the challenges. New financial tools, more foreign investors, and new trends like cryptocurrency trading can bring different risks.
Further, there can be newer evolutions of SEBI’s regulatory frameworks, with possible new rules focusing on themes such as high-frequency trading, cross-border market activities, and advancing digital assets. These strategies could also enhance the effort within SEBI’s new reforms to tie up with international regulatory bodies.
SEBI’s Comprehensive Approach to Ensuring Market Integrity
SEBI is using many methods to stop market manipulators. These include strict monitoring, smart tools, and quick actions to handle new problems like social media influence and computer-based trading. The SEBI guidelines on market manipulation signify its intent to ensure a transparent and fair market in securities, safeguard investor interests, and preserve the integrity of markets.
